Securitas AB. (OTCPK:SCTBF) Q2 2020 Results Earnings Conference Call July 29, 2020 8:30 AM ET
Magnus Ahlqvist – President and Chief Executive Officer
Bart Adam – Chief Financial Officer
Conference Call Participants
Edward Stanley – Morgan Stanley
Andrew Grobler – Credit Suisse
Rory McKenzie – UBS
Sylvia Barker – JPMorgan
David Roux – Bank of America
Thomas Graf – Handelsbanken
Rahul Chopra – HSBC
Neil Tyler – Redburn
James Winckler – Jefferies
Peter Testa – One Investments
Karl-Johan Bonnevier – DNB Markets
Mikael Löfdahl – Carnegie
Good afternoon, everyone, and welcome to our Q2 call. I’m Magnus Ahlqvist, and I’m here today in Stockholm, while our CFO, Bart Adam, is in Brussels. First, I would like to start by highlighting the tremendous contributions by our people, together with our clients, in the last few months. These have been very challenging times and a very different quarter, and the Securitas team has shown incredible resilience and ability and adding important value and helping our clients and society at large.
But let us now turn to performance in the quarter and the overall situation, which is heavily impacted by COVID-19. So like I said, this has been a different and a challenging quarter. Organic sales growth was a negative 4%. And there was a COVID-19 impact on all segments, the most significant impact in Europe, mostly related to our larger aviation presence. While we had more negative growth in April and May, we recorded minus 2% organic sales growth in the month of June.
The operating income and margin were impacted by COVID-19 and we had a negative impact in all business segments. But as stated earlier, the largest impact in Continental Europe.
Operating margin of 4% compared with 5% last year, and the operating model was supported by short term cost savings activities, but also supported by various government grants in the quarter, but we were on par in terms of price wage in the first half . And this is, as you all know, always very important for us.
We had a strong operating cash flow in the quarter or nearly SEK2.7 billion and this was supported by lower organics sales growth and positively impacted by timing effects related to payroll, and VAT in Europe and North America.
But looking ahead, we face continued uncertainty during the coming 6 to 12 months. And we continue to take actions to ensure that we come out stronger from this situation. And in light of the COVID-19 situation and the general uncertainty, we are launching a cost savings program. And the emphasis so this activities is in Europe, and we expect the cost between SEK350 million to SEK500 million and a two-year payback period. But I will come back and talk a little bit more about this program later on.
In terms of COVID-19 demand impact with the differences, positive and negative between divisions and countries and even within countries. And looking across the segments, our aviation business is the most severely hit. But security services are considered essential services and we have seen increased demand for several temporary services, especially then from healthcare, retail and banking sectors, and also for corporate risk management.
And due to the corona pandemic, there has been a clear reduction in commercial activity, and this is also something that has affected our important solution sales in a negative way during this period.
But having said that, this is an extraordinary situation. And while we are managing the short term challenges with our clients, we’re also having a lot of discussion with our clients about how do we provision and build the security equation in the new normal situation and I believe that with our offering, this is a significant opportunity for Securitas as we go forward.
Various government programs have helped them mitigate the negative impact and we currently have around 7000 people on temporary unemployment schemes, and this is 3000 less versus three months ago and the number is reducing. But in light of the situation and continued uncertainty, we have taken a conservative approach and increased provisions.
Now, let us turn to the progress or solutions and electronic security and then to the different business segments. And looking at solutions electronic security business, these areas have been affected by the corona pandemic. And in terms of electronic security, we had a strong negative top line impact at the beginning of the quarter, a situation which has improved, but was still negative at the end of the quarter.
But looking at recent acquisitions, the integration activities of Techo in Spain and Fredon, Australia all are progressing well despite the circumstances. And while we post all acquisition activities due to the COVID-19 situation, we are now looking forward to resuming this as soon as the situation normalizes.
And let us now turn to the performance in the different business segments and we’re starting with North America. So we had negative 2% organic sales during the quarter and this I should highlight this on strong comparatives. And the negative organic sales growth was related to electronic security installation business and critical infrastructure services.
Corona related restrictions and lockdowns had a negative impact in both of these areas. And reduced service levels due to the corona pandemic were partially offset by extra sales related to the pandemic.
Guarding was stable in the quarter and our team did a very good job, compensating reduced portfolio sales with extra sales and helping meet client needs. Now from a margin perspective, operating profit margin declined to 5.6% in the quarter, and this decline was primarily related to the order dimension electronic security, installation related and critical infrastructure services and both of them then related to Corona.
And we have undertaken short term cost saving sections in North America and here our team have been proactive and doing a very good job to mitigate the negative impact. And the operating profit margin in Guarding contributed positively thanks then to favorable service mix with more temporary services as I mentioned earlier.
But in light of the increased risks in the business environment, we have increased provisions related to employee benefits and collection of outstanding accounts receivable. And these provisions had a negative impact on the margin.
Turning then to our other large segment, which is Europe, we had negative 6% organic sales growth in the quarter, and this then compared to 1% positive in the same period last year. And this was mainly explained by the impact from COVID-19 and the significant impact on our aviation business. But growth was also negatively impacted by the previously announced contract losses in France, U.K., and an aviation contract in Norway.
A few countries such as Sweden had positive organic sales growth in the quarter. And when looking at the quarter, we saw significantly less decline in June, compared with the previous months but still negative numbers in the month of June.
From a profitability perspective, the operating profit margin in Europe in Q2 was 3.6%, and the decline was primarily related to the negative impact on COVID-19 with significant negative impact from aviation. And this negative impact and the related ideal time costs have to some extent been offset by Corona related government grants and support in several countries.
A few countries supported the operating margin, primarily a few countries in the Nordic Region, and France. And with that, we then turn to Ibero-America. And looking at Ibero-America, organic sales skills was minus 1% in the quarter, on very strong comparatives especially than from Spain.
Organic sales growth turned negative in Spain due to the Corona pandemic, as well as the previously communicated reduction of short term security solutions contracts. And we saw a mixed picture in Latin America, with negative development in a number of countries significant part of this impact and related again, to Airport Security.
Security solutions, electronic security reached 30% in the quarter. And this was also supported by the Techco acquisition. The operating margin in the quarter was 3.9%. And the decline was primarily related to the negative impact from COVID-19 and the previously mentioned factors in Spain. Government grants and support in several countries have helped offset costs for idle time. And Peru burdened the margin in the quarter and we have continued challenging conditions in Peru as well as in Argentina.
And with that, now handing over to our CFO, Bart for more details on the financials. Handing over to you, Bart.
Thank you, Magnus. And so we turn now to the financial information to the quarter. And as Magnus has explained, quite some underlying pieces that moved in the quarter, and it was for sure, not a business as usual quarter, but the quarter during which all of our people and our business, I think, has demonstrated great resilience. I can confirm that since the start of the COVID-19 we have really focused on the four key methods; that is, for people to start with, for clients to continue vendor services, and then financial stability, sustainability of our business, to focus on cost control, and focus on cash flow.
And I think we have seen tremendous efforts from the team. From our officers, for our technicians or branch managers, or commercial people or business leaders, I should say really many thanks to all of you.
Also, tremendous efforts from all of our people that work with the back office and company infrastructure. I can say that all different processes and functions, all of this works well, and that is thanks to good business continuity planning, combined with strong cooperation amongst the team and commitment of each individual. Thank you so much.
Turning back to the financials. I mean the operating income has been helped by proactive cost savings actions initiated within the different businesses and within very different parts and lines of an income statement. And that is, has been done — largely within all the different businesses.
Further then, the operating income has been positively affected by around SEK350 million in Corona related governments and grants and support and that is offsetting that to some extent, increased cost levels mostly from idle time that we have in the business.
The vast majority of these government grants related to segment security services Europe, and a part also to Ibero-America, but very little of such in North America. And that is, of course, consistent with the fact that we have most of the people on temporary unemployment in Europe as well.
The operating income was further negatively impacted by an increased level of provisions of SEK300 million. And this too reflects increased risks that we see. We see in general increased risks in our business environment, relating mostly to certain employee benefits, such as, for instance, healthcare related and also increased risk related to a collection of outstanding receivables.
For this matters, we always have provisions in our balance sheet all the time, but now in view of the increased risk environment, we have increased some of these provision levels. And so based on such, we have then increased upto an amount of over SEK300 million hitting them this quarter in the income statement for such an amount. And here the provisions were more spread over the totality of the business with a bit of an overweight in security services, North America.
Then we turn to the line of acquisition related costs, the reported amount of minus SEK63 million here in the quarter, ending up then at minus 80 for the first half year. And this entirely relates to the earlier closed acquisitions, as we refer to mostly in Australia and Spain.
For these acquisitions, we could expect another minus SEK25 million for the remainder of the year, adding then to around and expect the term that we set for the full year unless of course we would make any further acquisitions during the remainder of the year.
We then move to the line items affecting compatibility. And here we accounted for minus SEK61 million in the second quarter. And these items affecting compatibility relate entirely to the two transformation programs we talked about before. We had for these two programs, minus SEK209 million for the full year 2019, and now we have minus SEK106 million for the half first half year. So we continue at more or less the same average speed from 2019.
We referred earlier to a total of SEK650 million of items affecting compatibility that shall be accounted for related to these two programs, and that during the period 2019, 2020 and some part in 2021. And that SEK650 million is still the relevant amount to consider.
For 2020, we have said before, we could see an amount of around SEK250 million everything depending a bit on the speed of the different implementations. And we can confirm that our ambition with the programs has not changed, and broadly speaking, the two programs are on track. And there might be some delays as a result of COVID-19. But so far, nothing out of the extraordinary. Then on financial income and expenses, a bit lower amount here as an expense in this quarter, reflecting the development in the net debt as we will turn to in a second.
Moving to the tax line, here, the estimated full year 2020 tax rate is 27.0 a bit below the earlier estimated 27.2, ending then in the quarter at 26.8. And if anything, we see some downward effect on the tax rate resulting then from the different mix in results compared to business as usual.
Then I go to the next slide. And here we consider the impacts from the different currencies and the development thereof, and we can be rather short here as there have been very little very limited effects from the foreign exchange development.
We see here that the end rates for the U.S. dollar and the euro to the Swedish kroner are pretty much on similar levels as they were 12 months ago. And these rates were actually dropping a bit during the quarter after reaching a 10-year peak level towards the Swedish kroner at the end of March actually.
We then move to the cash flow. And here, as in the first quarter as well we have strong cash flow coming in during the second quarter. We see in the first half year, net investments of minus SEK61 [ph]. And that results from investments of a bit more than SEK1.4 billion and then reversal of depreciation of a bit below SEK1.4 billion.
As you know, with IFRS 16, or CapEx gets inflated, and that is from around SEK2 billion previous year per year to an amount of SEK3 billion. So capital expenditure, including IFRS 16 is around 3% of group annual sales and that would make around 2% if you were to exclude leases, as it was before, IFRS 16. The operating cash flow was very much positively affectedly — impacted by collections. We had good collections in the quarter, and that is through a lot of focus and efforts from the field on this method. And then we shall also add that the operating cash flow was helped also by lower organic sales growth. And that by itself is an important impact.
What I mean is that the lower organic sales growth adds about an estimated SEK1 billion to operating cash flow at the end of H1. Then we also had a positive effect on the operating cash flow of approximately SEK900 million from timing and for relief methods of payroll tax and value-added tax payments in Europe and in the U.S. in the first half year. So we had about SEK350 million of such matters in the first quarter, and now another SEK550 million of relief was added in Q2, adding them to SEK900 million in the first half year. About half of that SEK900 million relates to Europe and the other half to North America.
And going forward, then we should take into consideration that for the European effect, that will most neutralize during the remainder of the year, as we will have to make such payments during the second half of 2020. Only a small amount is expected to remain at year-end.
We do expect to have a positive effect from the U.S. measures on the full year basis, as payments are due only in 2021 and 2022. And the total amount we expect for 2022 then from the U.S. is over US$100 million.
So, all-in-all I believe we can conclude we have a strong cash flow also when we would exclude this Corona related effects. And we will continue to work closely with our cash and liquidity. And we will continue of course, with implemented measures related to the COVID-19 and that is close monitoring of accounts receivable with strict collection procedures. We are postponing certain discretionary projects and also of course, closely follow the cash relief programs through the different governments.
Which brings us down to the net debt. And here we can see that the net debt in end of June, ended at SEK 15.9 billion and that is considerably down from the SEK17.5 million at the end of last year. Remember that the jump when you look at the graphs here in between 2018 and 2019, as a result of the IFRS 16 implementation, which by itself made the net debt increase with SEK3.3 billion. And now in the first half of 2020, we had a positive free cash flow of SEK2.1 billion as we have seen also on the previous page, and then we paid an amount of a bit more than SEK400 million for acquisitions. And then those two matters combined to large extent and reducing net debt with around SEK1.5 billion from around SEK17.5 to just a bit below SEK16 billion.
Then we would normally have paid that dividend in May, but then that proposal was withdrawn by the board. And as previously communicated, the board may consider later to resolve on the new dividend proposal.
And then when you move to the graph again, we see that the net debt in relation to EBITDA is on 2.1. And that is also after IFRS 16, which then I believe is a very good number by itself, which stood actually I think 2.9 12-months ago.
Then we go to our financing. We have our debt maturity chart here. And we have earlier commented that we renewed RCF. We further added meanwhile, one more bank to the consortium, and it’s now a facility with 10 core banks for a total amount of SEK10 billion, the facility is for five years term [ph] with the possibility to extend to 2027. And the facility is totally unused at this point in time.
Standard and Poor’s confirmed our rating on BBB but changed the outlook from positive to neutral, and I believe that that is more a consequence of the general, uncertain environment rather than a specific Securitas matter.
We continue to have ample headroom in that rating. We have very good liquidity at quarter and with amongst all the SEK4.5 billion in cash, and then I said before, the RCF fully undrawn. As also discussed before, we have no financial covenants in any of our facilities, and as you know as well, we do not use any off-balance sheet factoring or supply chain financing.
I’m always happy to answer that question. But now, I’m giving you anyhow. And then based on our strong balance sheet, with net debt-to-EBITDA at 2.1 and I should also say that with this combined solid financing in place here, I believe we are very well positioned for the future, and we strongly believe in a strong position to continue and to execute on our strategy, as we have laid it out with you and share that with you at the end of last year.
And with this, I’m handing back then to Magnus.
Very good, and thank you Bart. So before we open up for the Q&A in a few minutes, I just wanted to share some more context and updates related to COVID-19. And also then priorities for the coming months. So as we communicate earlier, we started the crisis, the first I should say Crisis Response Team in January of this year. Both Bart and myself highlighted the four main focus areas. We have kept on working with these four main priorities for the last five, six months, and we continue to work with this also in the coming months, given the general uncertainty in the, in the global environment.
And looking down at the first two, first priority from the beginning has been the health and safety of our employees. And to this end, we have continuously been working to build and share knowledge and practices leveraging our global local presence. And, and here, it’s become clear that from a Securitas perspective, we are strong believers in a strong decentralized business model and the leadership that we have, and this model has really helped us by staying close to our employees and clients to manage this type of crisis situation in a very strong way.
And once again, thanks to the fantastic leadership of or many, many thousands of people within the Securitas team. From a client perspective, we are working on the near term priorities and that is continuously how we handle the situation right now, and how we leverage our range of protective services and our capabilities to meet and address the needs and the pain points from the clients in the short term. But as I mentioned at the introduction, we also having a lot of discussions with clients now in terms of how we then looking and clients looking for new solutions in what will be a new normal as this situation is normalizing, and given the strength and the investments that we have in making in terms of not only very strong guarding, but also strong technology, electronic security and solutions capability. This is a real opportunity for Securitas as we go forward.
Looking at cost control and cash management. Bart already highlighted and we also shared a fairly similar view with the Q1 results. And as you can see here, we’ve implemented a comprehensive set of measures to manage costs as well as cash. But now I would also like to share just a few more comments and some context to the to the cost savings program.
And as we’ve highlighted earlier, we are continuously monitoring and taking actions to protect our financial position and in light to the impact from COVID-19 and the uncertainty in the environment during the coming six to 12 months, we have started to implement the cost savings program. And we are taking a more comprehensive view to secure that we improve profitability across all parts of the business in the mid and the long term.
And we are doing this not only I should say in the light of the current situation, but also to accelerate and strengthen our strategic execution. All the decisions that we are taking are also fully in line with the strategy that we communicated externally in December. So this means looking at direct and structural or indirect cost savings, where we’ll see that this is needed. And while the group program, I should say that the emphasis of this program is in division Europe. And we estimate the restructuring costs to be in the range of SEK350 million to SEK500 million with a payback time of two years. And we expect the first positive impact from this to be seen in the fourth quarter of this year.
So with that, let us sum up the quarter. Organic says growth of negative 4% in Q2 and minus 1 in the first half. 19% negative real change in operating income, and this is the challenging situation, significant amount of uncertainty regarding the development also as we go forward.
But we have a strong position, strongest offering in the market, strong balance sheet, very good client relations, and cash position. And we are actively managing, monitoring I should say and managing the situation with clear priorities and actions, and always ensuring that we have a readiness to take further actions as required.
So with that, let us now open up the Q&A. So handing over to the operator.
Thank you.[Operator Instructions] The first question comes from the line of Edward Stanley from Morgan Stanley. Please go ahead.
Thanks for taking my questions. I’ve got three quick ones. And the — you talk about the extras business now being 17%. So there’s been a 300 basis point net increase, assuming some events and things have dropped out of there, which is obviously great. I’m just trying to establish where most of that business is coming from I suspect is across a number of industries. But is the majority coming from retailers shops, open or offices as people go back to work? Can you, I’m just trying to understand how long these contracts may go on for whether it’s a quarter or half a year or a year, for example.
And the second question on these provisions. I think you alluded to Security Solutions North America having a larger portion. But if we think about the provisions linked to receivables and — these on receivables are of the existing customers or is this on new work that you’ve won from you first-time outsourcing and you’re concerned about receivable risk because they are new customers to you. I’m just trying to understand a bit more about why the receivables suddenly at risk.
And then finally, you’ve added 1.8 billion swing in free cash flow, which is obviously fantastic, but to what degree do you think some of those tax deferrals and postponements will unwind in a second half. So I guess the question is of that 1.8 billion swing, how much should we expect to sort of swing back the other way in the second? Thank you.
Thank you, Edward. I will start and address the first question, then I think I’ll hand over to you Bart if you want to take question related provisions and cash. And so, when you look at the extra sales to give some more context and first of all, we have certain more extra sales in North America in general, and they’re the extra sales have then helped them to compensate some of the temporary reductions in portfolio business.
The main drivers if you look at segments, very much related to health, where we then have a few clients that are essentially looking for support to be able to manage in the COVID environment and retail. And retail could be different types when you look at it from a guarding perspective. Some of the adjusted project idle assets has been one aspect of this work that has been quite important. And other one has been also to make sure that that the retailers as responsible businesses are also COVID-19 compliant.
So that could also then be controlling and essentially then ensuring that they’re not too many people in the store. Those types of all measures banking, same from a number of customers that we’ve also than had increased demand from the banking segment. And those examples are very much from the kind of the on-site guarding. We also have the leading mobile guarding network in North America, and we’ve also seen increased demand there, and those could be, for example, closed offices, etcetera. And that require surveillance and that we control or do control runs, so beat patrol, etcetera as one other example.
And what we’re also looking at but that is also a little bit depending on viability of technology is also then to a lesser extent, I should say, but where there is clearly a need in the market, but we always only wanted to find solutions that are really effective. That is also down when we are leveraging technology. So there, our electronic security team are also working with very high standards in terms of how can we leverage technology also to help with screening procedures, etcetera as well.
And second, I think the second part to your question, and I hope the first part of the answer addressed some portion of that question but that that’s also then how long is this going to last? And frankly speaking, that’s the difficult to tell at this point in time because we have been quick in mobilizing, quick in or thanks to good client relationships to be able to understand the needs and to also be able to miss them.
And but it is difficult to say how long will that will last in a more normalized situation because it depends a lot on when will the situation normalize? And now obviously, we see very a different picture when we look across the U.S. in terms of, of the overall COVID-19 situation.
And if you’re looking at Europe, just to complete the answer as well. Less extra sales in general compared to what we have seen in North America, but clearly a demand for a number of temporary services and those are fairly similar in nature, to the examples I mentioned for North America.
So with that Bart, if I hand over to you then, related provisions and cash.
Yes, very good. So, when it comes to provisions, yes, we have of course, existing accounts receivable from invoices that we have sent out to our customers, and we follow us a staircase model to put up certain provisions that is, the older that those receivable gets, we will then reserve a certain provision. We will set aside a provision for some customers that might not be paying. And that is a model that has proven itself over a very long period, and in many different circumstances to work well, so that we are well provided for any accounts received that might — that might not be paid in the future.
What we have done now, we have really and that is a judgment call, to a large extent, and from our different people working with this. We have increased that provisioning level in this quarter so that the totality of what provisions are on the higher end and over normal staircase model reflecting basically the increased risk environments. We could see that so far, we haven’t seen too much of bad debt, I should say nothing of extraordinary. But we believe of course, in view of the uncertainty that is caused by COVID-19 that it might come to situations where there’s a little bit of an increase in some customers not paying part of their invoice.
And that is why then for a provision that is dealing with this matter, and that is sitting in our balance sheet has been increased during this quarter so that the total provision then reflects the new risk environment that we could see in relation to receivables. So, it’s mainly to existing customers where we could see and existing services that there is might be potential problem going forward. It’s a judgment call at the end of the day.
When it comes to the free cash flow, we had in the first half year SEK2.1 billion in free cash flow. And then SEK900 million was coming from relief measures from the government’s, half of that in Europe. You could say half of that in North America. So SEK900 million in the year-to-date in the first half year, half of that will go away, the European part will largely go away and that will reverse in the second part of the year. The North American part will increase. The North American part, we expect then at the end of the year, we will have over US$100 million or timing relief support in the U.S. So all-in-all, for the full year you could then expect that like SEK1 billion or a SEK will be more than SEK1billion will actually be helping our free cash flow for the full year 2020. And I think that I have answered those questions.
It’s really helpful. Thank you.
And the next question comes from the line of Andrew Grobler from Credit Suisse. Please go ahead.
Hi, good afternoon, just a couple from me. If I may, you hopefully gave the exit rate in June for the group. Could you give that for the region as well, if possible, please? And then secondly, you talked about the government support in terms of furlough schemes in total from a P&L in the first half. What are the expectations for the second half at this point? I realized things may well change before we get there, but what are you thinking at this point?
Yes, so thank you for the question. In terms, I take the one on the exit rate and then I hand over to Bart on the second. We had like I said we had a negative 2% exit rate in the month of June. Compare then to minus 4% in the full quarter, and we are a few percent better in North America. We are a few percent better in Europe, smaller difference in Ibero-America. And so, so encouraging from that perspective May was the toughest month in the quarter but encouraging signs towards the end of the quarter.
On the SEC, sorry. You want to continue Magnus. No, on the second question then about the government support measures. And I understand you refer now more to the income statement support measures rather than to the cash flow measures, because we just handled those once in the previous question. So, we have you may remember that, that when it comes to your Q1 call, we set that at that point in time we had around 10,000 people on temporary unemployment that has now reduced to 7000. So we hope and we believe that we will further reduce that during the next month, but of course, everything depends a bit on the situation as well.
So we believe that or call upon some of these government measures will probably reduce. Then the second question, of course, to what extent will these government measures remain in place, and that is really difficult to say. But we believe that they will not be just cut like that, but it’s very many different schemes and many very different countries involved in this. We monitored very closely or people are on top of it all the time. And we do not think that they will just be cut like that and then some of the major programs have been prolonged, or at least will also continue for the next quarter we think.
At the same time, everything is a bit uncertain environment. But as I said, we managed it in the best possible way. So two effects as a conclusion, first of all, the number of people that within the company have to rely on these schemes are reducing, secondly, we do believe that that the government measures will stay in place during a certain period of time going forward. But we cannot say how long exactly because I think no one really knows.
I just have a quick follow up on the – in terms of the 3000 people that have come off those schemes, have they or the vast majority of those people come back into revenue generating roles?
Yes, that is correct.
The answer to that is yes.
Brilliant. Thank you very much.
And the next question comes from the line of Rory McKenzie from UBS. Please go ahead.
Hi, good afternoon. It’s Rory here. My first question is can you say how big the drag was from the delays in electronic installation work are you referring. And also, have you seen any actual cancellations all just being pushed back? And then related to that, are you seeing any signs or are there any hopes that any of the short-term work could actually convert into new installations or new longer-term contracts? Thank you.
Yes, so there when we look at the electronic security on the top line perspective, North America is the region where we see the biggest impacts. So if you present negative when you look at the overall impact on the division, guarding positive growth in the quarter. So I think for completeness of the picture it’s essentially electronic security if you present negative, critically infrastructure services, a few percent negative and then have a few percent positive on guarding if you look at the impact.
One important thought here of course is that the backlog is something that we are following, because that should also be an opportunity to recover. And generally speaking the order backlog is good.
So I think also the most material impacts was commenting on in terms of installations as part then of the electronic security business.
Okay. Thank you. And second question then on the cost base. Are you being clear about how the government support schemes are now kind of tapering off. Are there any other temporary cost measures that might taper off into H2, for example salary reductions or the cost freezes? And just something you had a really strong better than expected margin performance this quarter. So interested to know if any of that was also more short term benefits?
Yes, I mean when you look at the total picture. We had a decent start of the year before COVID-19. And had expectations on pretty good development in North America, stable development in Europe. And looking then obviously to your direct question comparing second half to the first half, there are a few that are more kind of self regulating and that’s obviously with restricted travel, bonuses, et cetera, that are very closely tied to operating result real change. Those are kind of self-regulating and obviously helping, but we also see some of that impact also in the second quarter.
Okay. Thank you.
And the next question comes from the line of Sylvia Barker from JPMorgan. Please go ahead.
Hi. Good afternoon. Three questions for me, please. Going back to the provisions point, could you maybe just talk about the types of customers that you’re providing against? Obviously, you have a lot of SMEs on the mobile side, sounds like you’re seeing some additional demand. But are you concerned that some of them might actually be insolvent perhaps? Or is it more related to larger customers?
Then secondly, on the European cost savings program, could you maybe elaborate a little bit more how much of that will be labor-related savings versus kind of other savings? Obviously, you had one program not so long ago, and you have been talking about doing a similar transformational program to the one that you’re doing in North America. So to what extent is this like the North American program in any way?
And then finally, on aviation, could you comment on the revenue trends that you’re seeing or you saw during the quarter and where you are now? And maybe whether most of the furloughs relate to — or employees still on furlough relate to that business? Thank you.
Bart, do you want to take the first? And then I can take the second — or the second last question, I should say.
Yes. On the provision, Sylvia, so under IFRS 9, we need now to work and provision for potentially expected loss model. So the moment you account for an invoice, you also need to have a model that basically says, look, this is what we in general, might expect as bad debt coming out from this invoicing. So we have now basically invoiced all of our customers during the quarter, we have been also in line with IFRS 9 then major provisions for any expected losses from that. And that is basically what has happened now. We believe that in general, there’s a higher risk that some of those receivables will not be paid compared to before COVID-19, which I think is a fair assumption to make. And for that reason, we have increased the totality of our provision.
And then to say what type of customers? Well, the model is not — it’s not based on individual assessment. So it’s not like an individual assessment we have done customer by customer. Of course, if there are customers where we know that there is a certain risk, then we will take that into consideration. But in general, you could say that the concern is more around SMEs than smaller customers compared to larger customers. But then you also know if a large customer would have a problem, then it will also be larger invoices. So yes, it’s a bit of a generic answer. But that is really how it works as a model and then how we have now worked with that model and have put some judgment on top of that during this quarter in order to make sure we have the right provisions then from where we are today.
Yes. And then to the second question about — I mean, it is a group cost savings program, I want to emphasize that. But the emphasis is correctly, like you said, in Europe. We had negative 6% organic sales growth in the quarter. And when you look at that, we need to be in good shape also from management/indirect cost perspective. And with that type of development, we’re obviously not happy with the margin that we did generate. So yes, some part of this will be related to employees, but details of that we have not finalized yet. But we have obviously — and that is part of the reason for the estimate.
And then the other very important part is that, that we have some parts of the business that are challenged in light of the current situation. And we are doing this or undertaking this program to also be able to be strong in terms of ensuring return to profitability and that we have good profitability in all parts of the business. And that is the same in Europe but applicable for us around the world. This program is also in addition to the other programs that we are driving, and we have previously also highlighted that we will come back with updates related to the business transformation program in Europe. And that is something that we intend to do in the fall. But this is a program then that we are really driving now to make sure that we are enhancing profitability and coming back to a good level. But, as I mentioned earlier as well, making sure that any decisions we make are also helping and strengthening and accelerating the strategic direction that we are on.
I think that the other question was related to development during the quarter within aviation. It was not a very strong quarter in general. Some easing towards the end, but nothing that remarkable, I would say. So obviously, a lot of this we have in aviation, presence at more than 200 airports around the world, and you all know as well the general situation related to air travel at this point in time. And in terms of the furlough, yes, a significant part of the people who are on temporary unemployment are related to aviation. But we don’t have an exact split to share there. I hope that answers your questions, Sylvia.
Maybe if I could just follow up on the aviation just briefly. Is there any potential for you to maybe renegotiate any of the contracts and the way that you get paid on that, if there is a volume element normally?
Yes. And that is an important question. I’m glad you bring that up. This is important. We are in a new situation, and we are focused on delivering really good services with high quality. But those services, they generate value for the client, but they also generate value for us. If we are not able to find solutions there in terms of renegotiating to satisfactory development so that we can see that we have good profitability in the middle or the long term, then we will work to terminate those contracts. So that is worked in a task force that we started a number of months ago.
Some contracts we have longer contractual periods, and we obviously have to be respectful of any commitments that we have made. But this is one important part and also one reason that we have indicated a range between SEK350 and SEK500. We don’t know the outcome of all of that, but the ambition is very clear in terms of what our teams and what we are working on with these clients.
Thank you very much.
And the next question comes from the line of David Roux from Bank of America. Please go ahead.
Good day, gentlemen. Two questions from my side. The first relates to restructuring and integration costs relating to acquisition. There’s quite a pickup in this number. I think it was about SEK50 million up to SEK60 million for the first half. Which acquisitions do these costs relate to exactly, just given that M&A activity has been quite low over the last two quarters? Then secondly, can you remind us how much infrastructure services contributes to revenue for both North America and the group? Thank you.
Should I take the first question then, Magnus, on restructuring?
Yes. The items affecting comparability — sorry, the integration costs, acquisition-related costs relate, of course, to acquisitions. And in this case, they relate to mostly the Techco acquisition that we did in Spain in January of this year and then the Fredon acquisition in Australia that we also closed in January of this year, I believe it was. So that — those amounts entirely relate to the very recent acquisitions that we have been doing. And for these acquisitions, we could see another SEK 25 million — SEK20 million to SEK25 million that will hit during the remainder of the year. And that will then, so to say, conclude on the acquisition-related costs needed for those acquisitions from the recent history. I hope this answers your question there. And yes, I think that is — more or less, is from my side. And the second question, Magnus, will you take it?
Yes. So when you look at that part of the business, vast majority of that is in North America. And I mean, there, we don’t split the exact figures, but clearly double digits. And then if you look at that and obviously on a group level, that is then single-digit figure in terms of the importance of that part of the business. But there, I should also highlight that when you look at this part of the business, there was a significant impact related to COVID-19. We had some issues in Q4 and Q1 in terms of an important transition, and we’re starting to recover. But then because of lockdowns and restrictions, there was a significant negative impact. But that we’re obviously working to recover as we go forward.
Thanks. That’s very useful.
And the next question comes from the line of Thomas Graf from Handelsbanken. Please go ahead.
Magnus and Bart, thanks for talking my call. I was just wondering if you could highlight some of the status on the event business that was affected. And you mentioned it in Q1 but not so much in Q2. How is that current state and how was it in the quarter? If you could give some flavor, that would be helpful? Thanks.
Yes. So the event business, Thomas, we highlighted in Q1, that was also partly because there were some events of more importance as well in the affected period in Q1. We have seen a similar impact, negative — clear negative impact also in the second quarter, and that’s obviously related to the fact that they’re — in most countries, not possible for more than a few people to gather in a same place. So clear negative impact also in Q2.
All right. And also, could you give some comments on the employee turnover rate in the quarter? How is that compared to Q1? And it would be great. Thanks.
Yes. So the general trend is some easing and that we have seen. If you look at our most dynamic market being in the U.S., North America, clear easing in terms of turnover, but we don’t break out or report specific figures within the quarter. So I think we want to do that on an annual basis. But there is an easing, which is in line with expectations as well given the general environment.
Alright. That’s it from me. Thank you.
And the next question comes from the line of Rahul Chopra from HSBC. Please go ahead.
Hello. Good afternoon. Thank you so much. I have three quick questions. One on extra sales, could you please give us a bit more color in terms of drop-through margins from these extra sales? And again on margins, could you give us an impact on idle margin across — the impact of idle margin across regions? Secondly, I have a question around collection, cash collection. Can you give us a sense of how you should think of cash collection in the second half given the seasonality in the business?
And finally, in terms of competition. Could you give us some more details in terms of what you are seeing in terms of competition across different regions, particularly in U.S. and some countries in — across the world? Thank you.
Yes. So we had a little bit of a challenge hearing well, but I will try to address the first and the third question, extra sales and also related to competition. And then I hope that Bart captured the cash collection question. Yes, you’re giving me the thumbs-up. In terms of extra sales, the way it has looked in the second quarter is that we had a strong uptake in North America, very much from our guarding side but also from some of the other protective services. And when we talk about guarding, I should just reiterate what I mentioned earlier, that’s from on-site guarding, but also our mobile guarding capability, which is becoming strong also in North America.
A little bit less impact in terms of — on the totality of extra sales in Europe. But I should also highlight that a lot of this is short-term work. We’re working hard to mobilize, and it is also higher-margin work. So obviously, if you’re trading one for one, then you would have a positive margin impact when increasing the extra sales and then the decreasing corresponding amounts of — or temporary reduction of portfolio. Competition, yes, it’s a fairly fragmented business. We have a very clear focus in terms of building a very strong protective services offering, specializing in our different protective services. So I think our strength from that perspective really puts us in a good position.
We also had a number of clients at the time of crisis who have also reached out and just to reiterate the fact that they are glad that they are working with a strong and professional player, which has been able to mobilize and do tremendous things in a very short period of time but also in very challenging times. So I feel very proud, to be honest, of the effort, but also the — when getting the feedback as well from a number of clients around the world in terms of the work that we are doing.
So I think that’s as much as we can say. But I should also highlight that maybe one thing that differentiates Securitas from anyone else is that even though we are facing some short-term challenges, we’re handling those, but we continue to invest and drive our strategic transformation agenda. And that we are not taking our eyes off of that ball. And we are really pushing forward in a strong way with the business transformation program in North America, when I look at the global IT program that we’re driving on a global level. And then, Bart, did you capture the question in terms of cash collection?
Yes. I think in general, your question was about how we collect cash from our customers. And I can say that we had an even further increased focus on this matter during the second quarter because of the COVID-19, of course. So that has worked well, and we have seen our days sales outstanding actually coming down a little bit. So if anything, our collections have been faster compared to usual, nothing dramatic, but a little bit better actually. And maybe with the COVID-19, we’d expect that it would be the other way around.
Still, as explained before, we have increased then some of our risk provisions for future collection, meaning with that, that we have, as I said before, a certain model under our accounting rules. And now we have never been — has really provided for any bad debt or any collection matters as we are right now. That has been basically a judgment matter from our side that under these circumstances, we need to be at the higher end of what our provision should be.
The same thing related to the employees, on employee-related provisions, we also follow their actuarial models to calculate those provisions. And then under the accounting, you can move in a certain bandwidth around the midpoint then from what the actuaries calculate. And now we have also put ourselves there a bit on the higher end of the midpoint. So also, in view of that, we see actually some increased risk compared to a normal environment. I hope that I could answer your question with this.
Yes. Thank you so much. And then just in terms of the follow-up question on margins. Did you — I mean, could you also give a sense of impact of idle time across different geographies? How should we think about that during and after?
The impact of what you said?
I think of idle time.
Yes. I mean, the impact has been mostly in idle time in Europe. As in North America, it works a bit different in that sense that people are not so much guaranteed minimum number of hours. In Europe, under collective labor agreements, people have such guarantees in place on a monthly basis. So the element has been mostly in Europe. And then, of course, also the benefit — the government support measures have been compensating some of that — some of those costs, not entirely, but some of those costs.
Okay. Thank you so much.
And the next question comes from the line of Neil Tyler from Redburn. Please go ahead.
Good afternoon. Thank you. Two for me. Just kind of going back to the — a little bit more detail on the additional provisions, the — you mentioned the figure of SEK300 million. Can you give us an idea of how that’s split between bad debt and those employee provisions that you just described?
And secondly, on the topic of the electronic security installation backlog. Do you — are you confident you have the capacity to work off this backlog at an accelerated rate when restrictions are lifted? Or would you have to either recruit or perhaps retrain in order to achieve that? Thank you.
I suggest I start with the first question. On the additional provisions, it is SEK300 million. And it’s a bit more on the employee-related side than on the bad debt side, on the accounts receivables side. So you could roughly put 60% and 40%, yes, even two-thirds, one-thirds.. Yes, please, Magnus, go ahead.
Yes. And in terms of electronic security, we received a question also about competition before. We are obviously watching carefully, and our teams are managing the situation. But we are also trying to make sure that we are not reducing in terms of capability because of what will hopefully be looked back as a short-term crisis. So the general assumption should be that we have strong capability as we’re coming out.
And I should also mention that, I mean, the general COVID-19 situation, we entered from a position of strength. And we set also the ambition as a leadership team, all people in growth management, at the very beginning that regardless of what happens, we want to come out stronger. And that is really what is guiding us in a lot of these decisions as well. And same there in relation with our key electronic security leaders, so that we maintain strength and a lot of the know-how because this is very much a knowledge-based business, and we have a lot of technical electronic security know-how.
Thank you. That’s helpful.
And the next question comes from the line of James Winckler from Jefferies. Please go ahead.
Hey. Thanks guys. Most of the mine have been answered. But I just wanted to reiterate, I believe it was Sylvia’s question that this cost-cutting program in Europe is incremental and separate from the potential investment program, which you’ve talked about previously, that still could come in Europe. And I think you said that you’ll come back to that, for example, in the fall.
And then separately, if you could touch on how the infrastructure services have developed and come back towards the end of the quarter and how you’d expect that impact to be in Q3 hopefully better than it was in Q2 because it was also a headwind in Q1 as well?
Yes. Thank you, James. Yes, so the cost savings program is in addition to any other activity that we have either announced or what we will announce related to business transformation program in Europe. In terms of critical infrastructure services business, we were on a good path to recovery going into the month of March but then unfortunately had a setback related to COVID-19.
Our team there and the leaders, they have been doing a really good job in terms of adapting to the situation. And there, obviously, the ambition is that we are recovering. But I cannot give specific guidance given that there is still a lot of uncertainty in the U.S. environment related to the pandemic.
Okay, great. Thank you.
And the next question comes from the line of Peter Testa from One Investments. Please go ahead.
Hi. Thank you for taking my questions. I’ve got three. I’ll go one at a time, please. One is just when looking at the extra business, I was wondering two things. Firstly, the degree to which you’re starting to see that turn into permanent business as you talk to clients and the reopening becomes more of an established pattern. And then secondly, whether as you go through the period of time with reopening, whether that extra business is trending up or trending down in response to the normalization versus the actual need for managing, handling customers?
[Technical Difficulty] to say at this point in time. So we were — and looking at North America, because that’s, like I said, also related to Sylvia’s question, we were able to quickly mobilize and to help our clients. That business has remained fairly stable if you’re looking at the weekly — week-by-week development for a number of months now. But it’s also a very unique situation, a situation that we haven’t faced in the past. So it is difficult to give a forecast.
To the second part of the question there, will some of that become permanent? Well, if we’re making the assumption that we will have to work in new ways or at least in modified ways in the post-COVID-19 world, then there is obviously opportunity to be able to build those types of solutions for the clients, and that’s obviously an ambition that we have. But yes, difficult to forecast exactly how it’s going to play out. But the ambition is, obviously, we are leveraging all the protective services capabilities that we have, very strong in our different divisions around the world and that we are finding those solutions as we go forward.
Okay. But if you found engaging with customers, your existing customers, as you mentioned earlier in your presentation that, that’s gaining traction now and you’re starting to sign these agreements? Or does it remain an ambition at this point?
It’s — we are more with a number of the clients, still in the kind of handling the current situation mode and having discussions about how do we — and more dialogue about how do we build for the new normal. Because if you’re looking on the client side, many of the people who we are dealing with, just like we have been building crisis response teams, et cetera, and where I think that we have really excelled in terms of the way that we have been operating and adding value to the clients, it has by really working in lockstep in terms of protecting business continuity, protecting supply chains.
And in many cases, we are still a little bit in that mode, but now then increasing in the last couple of weeks and months, starting to have more dialogue about what does this really mean, and that’s just a bit the reason. I made a comment earlier as well that with our strength and also focused investments in solutions and electronic security, we are well placed to really be able to do good work with our clients in this new normal, depending a little bit obviously on what that will be. It shouldn’t be exaggerated, but that is clearly an ambition that we have and also something that we are proactively bringing up with the clients. But many of them are also coming and asking us, how do you think we should now structure the work as we go forward.
Right. And then the second question on the electronic security. Can you talk a bit about your — the degree to which you’re now able to reopen installation teams and make them more active to handle the pipeline as you finish the quarter? And just some situation maybe also on how the pipeline of that is developing of new business.
Yes. So it was negative, very negative in some key parts, North America throughout the quarter when you look at Q2, some normalization as a number of states started to reopen, et cetera. But then I would also say that there is a little bit of a tentativeness in terms of the approach from a number of clients because of the developments. And also then, you see quite a different picture between different states and even within states. So looking at North America, cannot really give any better insight in terms of the direction as we were leaving the quarter in that sense.
What we do, of course, is that we continue to also drive the commercial effort. This is one very important part in electronic security, if you look at the stand-alone electronic security business. And there was a negative impact in terms of commercial activity. Difficult to see clients, et cetera, in the lockdown situation. That is starting to normalize somewhat, but we are not back up to the kind of the speed where we were before COVID-19, not close to it.
Right. And the last question, please, was just as you reopen in Europe, can you give a sense of how the people who are on temporary assignment or temporary employment situations are being reengaged? Is it a sort of very linear arrangement, whereby you’re seeing customers return and absorbing the people or is it somehow a pause? Or how do you just understand that transition back into some version of normal?
Yes. So it depends on the nature of the services. And just to give two examples from the aviation space. If we have an airport that has been shut down for a period and if we have there the perimeter security and some of the non-passenger screening-related, well, there is more of a digital type of relationship, either you are engaged and providing them a number of those services or you’re not. And if you then look at the other extreme, some of the passenger screening-related, that is then much more volume-related. And they’re obviously a significant part of the recovery, will depend as well on passenger numbers coming up and general travel starting to normalize. So it does differ when you look at the impact, depending on what types of services we are providing. And if you’re looking at the aviation space, I mean, we have a very significant part which is screening-related.
Okay. Thank you very much for the answers.
And the next question comes from the line of Karl-Johan Bonnevier from DNB Markets. Please go ahead.
Yes. Good afternoon. I noticed in the report that your customer retention number is starting to head in the right direction again. And just if you could help me then, yes, to also work out with the movement we have seen in this extra sales and portfolio sales. Is it existing clients that is really then having a different mix of those services? Or is it the, say, existing clients that are still opting out and then new clients coming in and doing these extra sales? How does that pan out?
Yes. So thank you, Karl-Johan. Yes, it is true. I mean, when you look at — especially at North America, we have a better retention development first half of this year compared to first half of last year. First half of last year, we lost two larger contracts, and that is one important part. That was obviously then bringing down the retention figures last year. When you look at the extra sales, those are not part of the portfolio. So I think that is one important thing to keep in mind in terms of how do we actually then calculate the retention figure.
And when you look at the mix of, say, your existing clients taking extra sales, is that a major part of it? So maybe clients that don’t really have an on-site guard now is taking mobile monitoring for a while. Or how does that work?
Yes. And it could also be that you’re going from — especially more in the extreme period when there were a lot of idle facilities, et cetera, where we would then — perhaps then shift from having people on-site to having then scheduled control runs around schedule control, beat runs, et cetera, as well. So that could be a little bit the dynamic. And I think that is also where the strength in our protective services portfolio is also helping us in this type of situation in terms of meeting the client needs but also to be able to adapt.
Excellent. And as you know, we’re a junkie for information. Will you continue to give us these extra sales breakdown?
No. It depends a little bit on how things are developing. We felt quite strongly — I mean, these are extraordinary circumstances. We always try to make it easy as well for — or as easy as possible for you to understand the business without complicating with too much information at the same time. So if we consider that something is highly relevant, I mean, then we would always strive to share it.
And certainly, we will ask you questions about if it’s not. Thank you very much.
And the next question comes from the line of Mikael Löfdahl from Carnegie. Please go ahead.
Thanks. Hi, guys. So two or actually three questions for me. First, is it possible to say something about the negative impact from COVID-19 on your direct costs? And I guess first of all, extra costs for keeping your staff safe and so on and put that in relation to the government grants and also the sort of drop-through from more idle time. So is it possible to get some feeling of that? I mean, COVID-19 obviously has a negative net impact for you. But could you elaborate a bit on that? And on the same topic then, how — these type of extra costs that you currently are having, how are they trending now compared to April, for instance?
Then next question on aviation. Is it possible to say how much your aviation volumes have declined on a year-on-year basis? We know how much it is of your total — or was of your total sales last year. But how much is it currently? And then last question, and this is maybe a bit too early to answer. But have you seen any signs where you can approach customers with your solutions and electronic security offering? Any signs that customers are more willing to sort of transform their current guarding contracts into more bundled solutions, where they want to both save money and lower their costs, maybe they are more open to those type of suggestions now in more difficult times. And also, reducing the number of physical people in terms of security guards with technology instead because of the pandemic as such? Thanks.
Yes. Bart, do you want to start with the first question? And then I can comment on the aviation-related question.
Yes. Absolutely. So on the first question then, the negative impact of COVID-19 on mostly then direct costs. That is a very good question, a very difficult question to answer. Because what we have seen is that there is no standard reaction to any of this. I mean, it’s really different country-by-country, client-by-client, business-by-business, also how COVID-19 exactly impacts. But to try to provide sort of an answer to your question, I mean, we have all these costs from idle time mainly. That is really a big — the biggest impact in our income statement, combined then with some increased costs for sickness but not so much compared to the idle time and then also, of course, costs connected to, for instance, increased protective — personal protective equipment.
And then we have the support measures that have compensated to some extent. So support measures, we know exactly that is the SEK350 million we referred to. And then the net of all of this, well, as Magnus also tried to say, we entered the year in — definitely in North America, in a strong position, and we expected to see some good improvement in our top line and in — also so margin development. In Europe, we expected that to go further in a stable way, at least. So everything, the net any of this that is remaining, the margin drop that we see now, is really, I think, almost entirely related to the COVID-19. Then we had some other contracts that we referred before that we lost, and those also had a certain impact. But most of the net effect is then really what we see in the margin development, combined then also with the extra provisions we have been taking hitting the margin as well.
The trending of these extra costs, well, if anything, costs for idle time are going down, as we have commented. We have more than 10,000 employees as a reference point then during Q2, and now it’s more like 7,000 people going into Q3. So that has been going down. Sickness cost, not a dramatic change there. If anything, going down actually. So that is also something that we see. And then the protective equipment, that is something which is more, yes, stabilizing, if anything, actually increasing a little bit as well, as we are also deploying again more and more people to the field. So I think that answers your question then in terms of the negative impact that we see.
And then I think your other question was about aviation volumes. And there, we can say that those were around 7% for the total group. And they have — a bit more than 7% actually for the total group, and they have dropped with around 3% of total sales within the group. And I think the last question, Magnus, you intended to handle that one.
Yes. And I think in addition to what you mentioned, Bart, I mean, we also announced one contract in Norway, aviation-related that we lost and that we will not recover. There is also then the profitability and the commercial viability of some of the contracts, which is an uncertainty as we go forward. But we will have to take a tough stance to make sure that we run a profitable business.
To the last question, yes, so the offering is strong. The dialogue is there with the client in terms of solutions and electronic security. We have the capabilities. And there, it’s really a matter of us taking an active role but also that the clients are also willing to look at this in an active way. Some clients are more forward-looking and significantly faster and with some that are not as fast. I mean, then I think this type of a situation makes everyone realize as well that more of an integrated solution makes a lot of sense. So that is obviously important work for us and also an opportunity and focus area going forward.
Okay. Thanks a lot.
And the last question is a follow-up question from the line of James Winckler from Jefferies.
Hi, guys. Just quickly on the math. The payback period for the cost cutting program, you said two-year period, but it’s going to take four quarters to actually spend the whole amount outlined. So I mean, if you just take the midpoint of the SEK350 million to SEK500 million, that suggests sort of 20 basis points of support for this year and next year. Is that the right thinking? Or is it going to be more sort of gradual given — actually, you said it started in Q4, the benefit. So I guess — but for next year, about 20 basis points or is that too much?
I mean, your calculation is the right one and then, of course, comes the timing question, which is your actual question. We do see — I mean, at this point in time, we have the general program laid out. We will further work with the details during the next two months, and that will then further decide on how exactly things will impact and how exactly things will roll out. So it’s a bit too early to give a precise answer to your question. But if there is any assumption to be made, that is probably a good assumption, the one that you were making there. But as I said, we will have to come back on the further details on that.
Okay, great. That’s it. Thanks.
So let me then thank you for your engagement, and I hope this session has been informative, and we’ll speak to you soon. Thanks a lot, everyone.
Thank you, everyone. And take good care.